Chinese stocks surged on Friday, on track to close their best week since the 2008 global financial crisis, driven by optimism over new government stimulus measures.

The CSI 300 Index, a key benchmark for China’s largest companies, climbed as much as 3.8%, marking an impressive 15% gain for the week.

The last time the index saw a bigger weekly gain was in November 2008.

The tech-heavy ChiNext Index also posted a record jump of 9.3%, while a gauge of Chinese stocks listed in Hong Kong surged 3.7%, marking its longest winning streak since 2018.

Meanwhile, Hong Kong’s Hang Seng Index gained 12.85% this week—its strongest performance since February 1998, according to FactSet data.

Investor FOMO ignites a buying frenzy

Investor enthusiasm is surging, spurred by hopes of further stimulus.

David Chao, a strategist at Invesco Asset Management, commented in a Bloomberg report, “FOMO is running high for investors as Chinese equities have rallied nearly 10% in just three days.”

Chao also predicts Chinese stocks could have “another 20% runway to go,” based on historical valuation trends.

The rapid increase in trading volume led to technical disruptions on the Shanghai Stock Exchange, where turnover reached 710 billion yuan ($101 billion) within the first hour of trading.

Brokerages reported delays in processing orders due to technical glitches. The exchange acknowledged the issue and is currently investigating the cause.

This trading frenzy is partly driven by investor fears of missing out on gains, as Chinese markets will close next week for the Golden Week holiday.

Friday’s trading volume was double that of earlier days this week, highlighting the intense buying pressure.

Morgan Stanley turns bullish on China

Investor confidence was bolstered earlier in the week by reports suggesting that China may issue 2 trillion yuan ($284.43 billion) in special sovereign bonds.

Additionally, new guidelines introduced by the country’s securities regulator aim to encourage companies to attract long-term investors, further lifting market sentiment.

Raymond Chen, a fund manager at ZiZhou Investment Asset Management, remarked, “This feels more like a market reversal than a mere rebound, and we may soon see fiscal measures rolled out as well. Many skeptics are being left behind.”

Morgan Stanley, along with other major financial institutions, has become increasingly bullish on China’s markets.

Strategist Laura Wang stated that the CSI 300 Index could see an additional 10% upside in the near term, signaling renewed confidence after months of market uncertainty.

Earlier this week, the Wall Street bank shifted its stance, no longer favoring onshore Chinese stocks over offshore counterparts due to the absence of state-backed buying.

The surge in Chinese stocks has also lifted other Asian markets with significant exposure to China, amplifying the region’s overall risk-on sentiment. As Chinese markets head into a holiday break, investors across Asia remain optimistic about further gains in the near term.

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Italian stocks bounced back this week as investors embraced a risk-on sentiment. The blue-chip FTSE MIB index rose to a high of €34,400, its highest point since July 24. It has risen by over 12% from its lowest point in August and by almost 15% this year. 

ECB interest rates

One of the main reasons why the FTSE MIB index has soared is that the European Central Bank (ECB) has embraced a highly dovish tone. 

In its interest rate decision last week, the bank slashed interest rates by 0.25% and hinted that more were coming.

The case for more cuts emerged earlier this week when S&P Global published weak manufacturing and services PMI numbers.

According to the company, the manufacturing PMI figure remained below 50, meaning that it is still in a contraction mode. 

Most European manufacturers are struggling because of the elevated energy prices after Russia reduced supplies in 2022. While gas prices have dropped, many European companies are paying higher prices than those in China.

There is an elevated risk that Europe’s de-industrialisation will continue. This month, Volkswagen caused shockwaves when it announced plans to shutter some plants in Germany. 

In addition to higher energy prices, Chinese companies benefit from lower interest rates.

The service output continued retreating in September. Therefore, analysts expect the ECB will continue cutting interest rates in the final two meetings this year and possibly continue in 2025.

Stock indices like FTSE MIB do well when central banks are cutting rates. However, a risk for the index is that the euro has strengthened substantially in the past few months, which may affect international demand. 

The ECB is not the only central bank that is cutting interest rates. The Federal Reserve delivered a jumbo cut last week while the likes of Swiss National Bank (SNB) and Riksbank continued easing.

These cuts raise the chances of more corporate activity like acquisitions in the region. Just recently, Unicredit, one of the biggest members of the FTSE MIB index, started building a stake in Commerzbank. In an interview, the CEO hinted that the stakebuilding would lead to an acquisition.

Italian stocks receive a Chinese boost

The other top catalyst for the FTSE MIB has been the recent actions by the Chinese government, which has unveiled a series of stimulus measures to support the ailing economy. 

The PBoC has slashed interest rates and lowered the reserve ratio that banks should have. That action alone will unlock over $100 billion in funds. 

At the same time, the central government has hinted that it will deliver more stimulus, estimated at $140 billion.

These measures are important because the economy is slowing. The most recent data showed that it expanded by just 4.7% in the second quarter, leading to downgrades by the likes of Citi, Morgan Stanley, and Goldman Sachs.

China is an important country for Italian companies because many of them sell their products there.

Top FTSE MIB movers

Most FTSE MIB constituents have done well this year. The best performer is Unipol Gruppo, a leading company that operates in the banking and insurance businesses. Its stock has jumped by more than 105% this year. 

The other top performer is BCA MPS, the oldest bank in the world, whose shares have jumped by over 75%. Bper Banca shares have risen by 70%, while Ferrari has risen by 40%. 

The FTSE MIB index’s top laggards are STMicroelectronics, ERG, Campari, Stellantis, and Telecom Italia. All these stocks have plunged by over 20% this year.

FTSE MIB technical analysis

The daily chart shows that the FTSE MIB index has staged a strong comeback in the past few weeks. 

A closer look shows that it has formed an inverse head and shoulders chart pattern, a popular bullish sign. It has now moved slightly above this pattern’s neckline. 

The stock has also moved above the 50-day and 100-day Exponential Moving Averages (EMA) while the MACD indicator has moved above the neutral level.

Therefore, the FTSE MIB index will likely continue rising as buyers target the all-time high at €35,460, up by 3.25% above the current level

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Shares of Hong Kong’s major property developer New World Development surged by 23% after the unexpected resignation of CEO Adrian Cheng, a prominent figure from the company’s founding family.

The Hong Kong-listed company saw its stock price jump when trading resumed on Friday, after being temporarily halted for a major announcement regarding Cheng’s departure, CNBC reported.

In a statement, New World Development announced that Cheng, grandson of the company’s founder, is stepping down to focus on “public service and personal commitments.”

His resignation marks a significant shift in leadership, as Chief Operating Officer Eric Ma Siu-Cheung was named the new CEO.

Ma’s appointment is notable, as it marks the rare occasion when an outsider has taken the reins of a family-run business in Hong Kong.

Financial struggles amid property market downturn

New World Development has faced significant financial challenges in recent months, with the company reporting projected losses of between HKD 19 billion ($2.4 billion) and HKD 20 billion ($2.6 billion) for the fiscal year ending in June.

These losses are attributed to a combination of declining property sales, investment losses, and substantial impairment charges.

The property developer, like many in the region, is grappling with the continued slowdown in Hong Kong’s real estate sector and broader financial difficulties in mainland China.

With debt levels mounting, New World Development’s financial outlook has been weighed down by the same macroeconomic headwinds affecting the entire region’s property market.

Focus on corporate governance

The decision to appoint Ma Siu-Cheung as CEO is seen as a shift toward better corporate governance, an issue that has gained increasing importance in Asia.

Alicia Garcia-Herrero, chief economist for Asia Pacific at investment bank Natixis, remarked that the move away from traditional family succession signals a potential new direction for Hong Kong’s corporate elite.

“This shows that corporate governance is crucial. Family-run firms with preferred heirs can struggle in challenging markets. It’s a tough environment, and only the best management can thrive,” Garcia-Herrero told CNBC.

Stimulus measures boost investor confidence

The surge in New World Development’s stock price also coincides with a broader rally in Hong Kong and Chinese equities, spurred by recent stimulus measures from China’s central bank.

Investors have reacted positively to Beijing’s efforts to stabilize the economy, including fiscal and monetary policy support aimed at halting the real estate market’s continued decline.

On Thursday, China’s top leaders declared their intention to curb the property market downturn, further buoying investor sentiment.

The combination of leadership changes and China’s economic stimulus has created a wave of optimism for the embattled developer, signaling that the company’s fortunes could improve in the wake of these major shifts.

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Spanish stocks are firing on all cylinders. The closely followed IBEX 35 index has risen for three consecutive weeks, rising to a record high of €12,000, bringing the year-to-date gains to almost 20%. It has jumped by over 22% from the lowest point this year.

Central banks boosts

The IBEX 35, which tracks the biggest companies in Spain, has done well this year, helped by the ongoing actions by global central banks.

In Europe, the ECB has delivered two interest rate cuts in its bid to support the economy, which has shown signs of slowing down.

The most recent data showed that the economy grew by 0.3% in the second quarter after rising by 0.1% in the previous quarter.

There are signs that the economy is not doing well. The manufacturing PMI retreated to 44.8 in September from the previous 45.2. It has remained in the contraction zone for months. The services PMI has also softened a bit, meaning that the situation is getting worse. 

Therefore, there are odds that the European Central Bank will continue cutting rates in the next few months. Lower rates will boost Spanish companies by reducing their borrowing costs and by bringing investors from the bond market.

Other global central banks have slashed interest rates. In the UK, the Bank of England cut rates by 0.25% in July and left them unchanged this month. Analysts expect that the bank will deliver gradual cuts in the coming meetings.

The Federal Reserve has also cut rates by 0.50%, with officials signaling that more cuts were on the way. The same is happening in other countries, meaning that the cost of money will continue to fall in the near term.

Historically, global stocks rise when central banks have embraced easy money policies as we saw during the Covid-19 pandemic.

China stimulus hopes

Many IBEX 35 companies do a lot of business in China. Therefore, their stocks surged this week after the country’s central bank and officials unveiled large stimulus packages. 

For example, the central bank unlocked over $140 billion in cash, which will be used to boost the capital markets. Companies will use these funds to buy back their stocks and lend to other institutions.

Bloomberg has also reported that the government is considering unleashing over $140 billion in stimulus as the economy slows. These actions have flowed across all financial assets, including cryptocurrencies. In a note, a Bank of America strategist said:

“This is the first time the government has encouraged leveraged investment in the stock market. A liquidity-leveraged rally should still have significant room to go.”

Top IBEX performers

Most companies in the IBEX 35 index have jumped this year. Banco de Sabadell stock has jumped by over 80%, making it the best performer. Like other European banks, it has done well because of the substantially high net interest income because of higher interest rates. 

Other Spanish banks like Caixabank, Bankiter,  and Santander have risen by over 30% this year. The other notable gainers were firms like IAG, Solaria, and Unicaja Banco. 

On the other hand, the top laggards in the index are companies like Repsol, Naturgy Energy, Grifols, Enagas, and Acciona. 

IBEX 35 technical analysis

The weekly chart shows that the IBEX 35 index has been in a strong bull run this year. It has recently flipped the important resistance point at €11,465, its highest level on June 3. 

The index has moved above the 50-week and the 25-week moving averages while the Relative Strength Index (RSI), momentum, and the Stochastic Oscillator have all pointed upwards. Therefore, the path of the least resistance for the blue-chip index is bullish, with the next point to watch being at €12,100.

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American stocks performed great this week, thanks to the recent decision by the Federal Reserve to cut interest rates and the robust stimulus provided by Chinese authorities. The Dow Jones rose for three consecutive weeks, reaching a record high of $42,310.

Similarly, the S&P 500 index surged to a record high of $5,763 while the Nasdaq 100 index jumped to $20,277, its highest swing since July 15.

Most investors are now focusing on the upcoming third-quarter earnings season, which will start on October 15. But before that, several notable companies will publish their earnings. Here are some of the most notable ones to watch.

Nike | NKE

Nike, one of the best-known brands, has become a fallen angel as its stock has plunged by almost 50% from its highest point in 2022.

The company has struggled as its sales and profitability growth has slowed. Most of this slowdown has happened in China, a key market that is going through turmoil. Its online sales have also slowed while demand for sneakers has softened.

Most importantly, competition in the industry has risen, with companies like Hoka and On Holding taking market share.

Most recently, Nike appointed a new CEO, replacing John Donahoe with Elliot Hill, a veteran who has worked there for decades. 

Nike stock will be in the spotlight next week as the company publishes its financial results. Analysts expect its sales will be $11.65 billion, a small increase from the $12.9 billion it made last year. They also expect its annual revenue to be $48.8 billion, down from $51.3 billion last year.

Carnival | CCL

The cruise line industry has bounced back this year, with most companies reporting strong forward bookings. 

Carnival, the biggest player in the industry, has continued to underperform the other big players. Its stock is barely moved this year and has risen by 35% in the last 12 months.

Royal Caribbean Cruises has risen by 41% in 2024 and by 105% in the last 12 months while Norwegian has jumped by 5% and 35% in the same period. 

Carnival shares will be in the spotlight as it publishes its financial results on Sep. 30. Analysts expect its revenue to come in at $7.8 billion, a big increase from the $5.7 billion it made in the previous quarter. 

Analysts believe that Carnival stock is undervalued as it has a forward price-to-earnings ratio of 15, lower than the S&P 500’s multiple of 21. Royal Caribbean has a multiple of 18, meaning that Carnival has a chance to close the valuation gap.

Constellation Brands | STZ

Constellation Brands is a leading company in the alcohol industry. It owns some of the top brands in the US like Modelo and Corona. Modelo has gained market share in the past two years as more people boycotted Bud Light. 

Constellation Brands’ revenue growth has grown from over $8.3 billion in 2019 to over $9.96 billion last year. Its annual profit has also risen to over $2.4 billion in the trailing twelve months (TTM).

Analysts expect that Constellation Brands revenue will come in at $2.9 billion, while its annual revenue will be $10.47 billion. Next week’s earnings will likely be a catalyst for a stock that has barely moved this year.

Tilray Brands | TLRY

Tilray Brands stock price has underperformed the market, falling by almost 30% in the last 12 months. Other cannabis companies like Aurora Cannabis, Cronos Group, and Curaleaf have also plunged.

Tilray is working to become a more diversified company by investing in the beer industry, which now accounts for over 40% of its revenue. It recently acquired several brands from Molson Coors, a year after it bought eight brands from AB InBev.

Therefore, its next earnings, scheduled for Friday, will provide more color about its beer business and its profitability. Analysts expect its revenue to be $220 million, a drop from the $229 million it made last quarter.

The other top companies that will publish their results next week are Paychex, McCormick, Lamb Weston, Cal-Maine Foods, Conagra Brands, and Levi Strauss.

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